2013-01-01 00:45:55 - Jordan and the West Bank and Gaza Business Forecast Report Q4 2012 - a new country guide report on companiesandmarkets.com

We maintain the view that Jordan´s long-term political outlook is among the most stable in the region, with the monarchy having implemented a series of political and economic reforms in recent years. Nonetheless, the social uprisings that emerged in the region since 2011 are indicative of the threat that low living standards and lack of political freedoms pose to long-term stability. Jordan´s near-term economic outlook is bleak.

We have long been highlighting the detrimental impact that widespread regional unrest was having on the economy, as it hits inflows of foreign direct investment as well as the all-important tourism sector. With government austerity set to bite in the coming months, we do not expect to see an economic recovery any time soon.

 

 

Given the ongoing deterioration to Jordan´s balance of payments position, or core view now sees the dinar being devalued at some point in 2013.

Major Forecast Changes

We are forecasting a sharp deterioration to Jordan´s balance of payments position over the coming quarters, as a sharp slowdown in tourism receipts and a surge in the commodity import bill pushes the current account further into deficit. We are forecasting a current account shortfall of 11.1% of GDP in 2012, narrowing to 9.2% in 2013.

Key Risk To Outlook

The recently approved IMF Stand-By Arrangement has helped alleviate pressure on Jordan´s fiscal and external accounts for the time being. However, should disbursals under the programme stall – which is an increasing possibility given the king´s recent decision to reverse previously announced fuel hikes – such pressures would undoubtedly return. This would once again raise fears over the possibility of an uncontrolled devaluation of the dinar.

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